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Defined international human resource management (IHRM):

International human resource management (IHRM) is the process of procuring, allocating,

and effectively utilising human resources in a multinational corporation. If the MNC is simply
exporting its products, with only a few small offices in foreign locations, then the task of the
international HR manager is relatively simple. However, in global firms human resource
managers must achieve two somewhat conflicting strategic objectives. First, they must
integrate human resource policies and practices across a number of subsidiaries in different
countries so that overall corporate objectives can be achieved. At the same time, the
approach to HRM must be suffi ciently flexible to allow for significant differences in the type
of HR policies and practices that are most effective in different business and cultural
settings.

This problem of balancing integration (control and coordination from HQ) and
differentiation (flexibility in policies and practices at the local subsidiary level) have long
been acknowledged as common dilemmas facing HR and other functional managers in
global corporations. Although some argue that IHRM is not unlike HRM in a domestic
setting, others point out that there are significant differences. Specifically compared with
domestic HRM, IHRM (I) encompasses more functions, (2) has more heterogeneous
functions, (3) involves constantly changing perspectives, (4) requires more involvement in
employees͛ personal lives, (5) is influenced by more external sources, and (6) involves a
greater level of risk than typical domestic HRM.

When compared with domestic human resource management, IHRM requires a much
broader perspective on even the most common HR activities. This is particularly so for HR
managers operating from a MNC͛s headquarters (HQ). The number and variety of IHRM
activities are daunting. International HR managers must deal with issues as varied as
international taxation; international relocation and orientation; various other administrative
services for expatriates; selecting, training and appraising local and international employees;
and managing relations with host governments in a number of countries around the world.

Even when dealing with one particular HR function area such as compensation, the
international HR manager is faced with a great variety of national and international pay
issues. For example, while dealing with pay issues, the HQ -based HR manager must
coordinate pay systems in different countries with different currencies that may change in
relative value to one another over time. An American expatriate in Tokyo who receives a
salary of $100,000 may suddenly find the buying power of that salary dramatically
diminished if the Japanese yen strengthens in value relative to the US dollar. A US dollar
purchased 248 yen in 1985, but less than 110 yen in 2000.

In the case of fringe benefits provided to host company employees, some interesting
complications might arise. For instance, it is common in the United States to provide health
insurance benefits to employees and the employee͛s family, which usually means spouse
and children. In some countries however, the term ͞family͟ may include a more extended
group of relativesͶmultiple spouses, aunts, uncles, grandparents, nephews, and nieces.
How does the firm͛s benefit plan deal with these different definitions of family?

A final aspect of the broader scope of IHRM is that the HQ -based manager deals with
employee groups that have different cu ltural backgrounds. The HQ manager must
coordinate policies and procedures to manage expatriates from the firm͛s home country
(parent country nationals, PNCs), host-country nationals (HCNs), as well as third country
nationals (TCNs, e.g. a French manager working for an American MNC in the firm͛s Nigerian
subsidiary) in subsidiaries around the world.

Although such issues are important for the HQ -based manager, they are also relevant to the
HR manager located in a subsidiary. This manager must develop HR syst ems that are not
only acceptable to the host country but also compatible with company -wide systems being
developed by his or her HQ -based counterpart. These policies and practices must effectively
balance the needs and desires of local employees, PCNs and TCNs.

It is at the subsidiary level that the increased involvement of IHRM in the personal lives of
employees becomes particularly apparent. It is not unusual for subsidiary HR managers to
be involved in arranging housing, healthcare, transportation, educa tion, and recreation
activities for expatriate and local staff.

IHRM activities are also influenced by a greater number of external forces than are domestic
HR activities. The HQ-based manager may have to set equal employment opportunity (EEO)
policies that meet the legal requirements of both the home country and a number of host
countries. Because of the visibility that foreign firms tend to have in host countries
(especially in developing countries), subsidiary HR managers may have to deal with
ministers, other political figures, and a great variety of social and economic interest groups
than would normally be encountered in a purely domestic HRM.